Goldman Sachs Reports Record Earnings Decline

Goldman Sachs Group Inc., the largest of the remaining independent U.S. securities firms, said profits for its fiscal third quarter, which ended Aug. 29, fell a record 70% from a year earlier, to $845 million, or $1.81 a share.

Analysts, including David Trone at Fox-Pitt Kelton Cochran Caronia Waller, have said the credit crisis shows that independent securities firms like Goldman should consider merging with a banking company to provide a more stable source of funding.

Goldman downplayed that possibility. David Viniar, its chief financial officer, said in an interview Tuesday that his company is not interested in doing a deal with a banking company. But he also said he would never rule out the possibility entirely.

"Right now we think our business model works because our business works," Mr. Viniar said. "Our performance speaks for itself and will continue to speak for itself."

The profit decline was Goldman's steepest in its nine years as a public company.

Overall revenue dropped 51% from a year earlier, to $6.04 billion. Revenue from fixed income, currencies, and commodities, the company's biggest source of revenue, dropped 67%, to $1.6 billion.

The company reported $275 million of writedowns on leveraged loans and related hedges, $500 million on residential mortgages and securities, and $325 million on commercial mortgages and securities.

Goldman's shares slumped 12% Monday, and its senior notes dropped to a record low, on concern that no investment banks, even the most profitable ones, were safe. The shares lost another 1.84% Tuesday.